Tag Archives: Campaign Finance Reform

After Citizens United, Americans are pushing back against the corporate misuse of the people’s free speech rights. But this battle is about more than campaign finance reform.

Add the credit rating agencies that rubber-stamped Wall Street’s toxic financial products to the list of corporations twisting the people’s First Amendment free speech rights to protect themselves from government regulation and lawsuits. The rating agencies assess risk in various financial products, including bonds, securities and derivatives. The corporations that operate these credit rating agencies get paid billions of dollars for this work and include Standard & Poor’s (McGraw-Hill Companies, $6.9 Billion annual revenue), Moody’s Corporation ($1.8 Billion annual revenue) and Fitch, Inc. (Fimalac, €560 million annual revenue).

These corporations are widely believed to have played a significant role in the 2008 economic collapse by giving unreasonably optimistic ratings to very questionable bonds, securities and more abstract creations of Wall Street, such as synthetic collateralized debt obligations. This led a number of institutional investors like local banks and municipal pension funds to unwittingly make precarious investments that ultimately went down the drain. Observers have attributed these allegedly misleading ratings to an unhealthy conflict of interest in which financial product issuers pay rating agencies for their assessments.

You might be wondering what this all has to do with the First Amendment and free speech. As rating agency corporations face demands for reform from Congress and a legion of angry investor lawsuits, they are hiding behind the argument that they have a corporate right to free speech, so they had no obligation to provide honest and accurate investment information. In fact, they are claiming the same rights as journalists, which means lawsuits against them must demonstrate “actual malice”, a high legal standard to meet. After earning billions of dollars for their rating fees, these companies are now claiming that thanks to the Supreme Court’s creation of corporate speech rights, they are not accountable for those ratings.

While the idea that corporations can use “free speech” to escape accountability for misleading investors and blow up economies may seem (and is) outrageous, the argument has had great success to date. Of the 30 lawsuits initiated against Standard & Poor’s, five have been dropped, and Standard & Poor’s has succeeded in 12 of its 15 motions to dismiss. One major case that has survived S & P’s motion to dismiss is Abu Dhabi Commercial Bank v. Morgan Stanley & Co. Inc. In that case, the District Court recognized that while the courts in recent decades have indeed given rating agencies broad free speech rights in its publicly disseminated ratings, those speech rights are narrower in the context of private consultation. In essence, when someone is paying you for private advice, you do not have a free speech right to mislead. This case is in its early stages, and may turn on a variety of factors, including whether the ratings which privately or publicly disseminated.

While rating agencies have largely had their way in court, recent legislative efforts have been more successful. Senator Al Franken’s (D-MN) amendment to the financial reform bill would create a Credit Rating Agency Board that would pair bond issuers with rating agencies, ending the current conflict of interest. Senator George LeMieux’s(R-FL) amendment would strip a federal requirement that had essentially funneled institutional investors to the three major rating agencies.

It remains to be seen whether either of these amendments will survive in the legislative process (including the armies of Wall Street lobbyists), but it is likely that some form of rating agency reform is imminent. This could be a significant achievement, given the stranglehold rating agencies have had over Congress and the SEC in the past few decades. The SEC has proposed rating agency reforms on numerous occasions from the 1990s on, only to wilt in the face of whining and pressure from the rating agencies. Rating agencies similarly have always had a strong foothold in Congress, arranging lobbyist meetings with every member of the Senate Banking Committee during the financial reform deliberations. In 2009, the three major rating agencies spent $4,150,000 on lobbying, and they are on a similar pace for 2010. (source: opensecrets.org)

No matter how the battle in both the courts and the legislature comes out, the corporate “free speech” trump card that is increasing used when corporations run to court after losing legislative debates must end. Free speech is for people, not corporations. If Americans must rely on private corporations to serve as rating agencies on which our economy depends, the fabrication of a theory of corporate, rather than human, speech rights must end.

We are all familiar with the devastating Supreme Court decision, Citizens United v. FEC that went down this January. However, corporate interests, in conjunction with the political right, have mounted a serious offensive to the entire clean election infrastructure. They are led by Republican operative/lawyer James Bopp, whose end goal is a United States “free” of campaign finance laws, where corporations can make unlimited contributions to elections anonymously. The legal battlefield of campaign finance reform is fierce, and I’ve outlined some key cases below, which I’ll break down in greater detail once the Supreme Court releases its decisions.

For starters, check out the Campaign Legal Center, which has put together an absolutely incredible document outlining the corporate right’s grand plan for methodically eviscerating campaign finance laws. It’s a long read, but here’s part of the intro:

Instead, their apparent goal is to go back nearly a century and dismantle many of the campaign finance reforms that have governed elections for decades, and to revert to the era of unregulated political spending that characterized the turn of the 20th Century.
It is clear that even disclosure laws – which conservatives have long championed as the only legitimate form of campaign finance reform – are under attack.
James Bopp, the attorney who initiated Citizens United and a longtime member of the RNC, for instance, has made no secret of the fact that his ultimate goal is the elimination of virtually all campaign finance restrictions including the reporting of donors. In January, he told the New York Times that, “[g]roups have to be relieved of reporting their donors if lifting the prohibition on their political speech is going to have any meaning.”
…
The litigation effort against decades’ worth of campaign finance laws are concentrated in five principal subject matter areas:

There are several cases we should be watching closely in the coming days and weeks.

Doe v. Reed: This case, brought by James Bopp, representing Washington state anti-gay activists, asks the Court for a constitutional right of anonymity for individuals who sign ballot initiative petitions.
The plaintiffs feebly argued petition signatories might face dangerous retaliation for their anti-gay views. During oral arguments, Justice Scalia mocked this concern, “The fact is that running a democracy takes a certain amount of civic courage. And the First Amendment does not protect you from criticism or even nasty phone calls when you exercise your political rights to legislate or to take part in the legislative process.”
The real purpose of this case was not to protect anti-gay Washingtonians, however, but to weaken disclosure requirements in election law. Bopp has a long term strategy to undermine disclosure requirements for corporations, so that they can funnel unlimited money into elections anonymously.This decision could come down as soon as Tuesday.

McComish v. Bennett: This case was brought by independently wealthy and heavily funded Republicans for state office challenging the Arizona Citizens Clean Elections Act, which provides public matching funds to candidates running with only public financing. The law was passed in 1998 after a series of embarrassing scandals in which Arizona legislators were caught taking campaign bribes in exchange for votes.
The plaintiffs claim that public funding chills their free speech rights, because whenever they raise money, their opponents would receive matching funds to use speech against them. They also claim that the reasoning behind the Arizona Citizens Clean Elections Act was undercut by the Supreme Court’s holding in Citizens United that campaign spending was not inherently tied to corruption. The Ninth Circuit soundly rejected both arguments, finding that the Arizona law responded to an important state interest in promoting clean elections, and that the candidates’ speech rights had not been chilled.
Now the plaintiffs have asked Justice Kennedy to stop Arizona from distributing public matching funds until the Supreme Court hears the case. Justice Kennedy will probably bring the case to the conference and issue some sort of decision in the coming days. Imagine, the Arizona government actually on the right side of justice in this case…

Credit rating agency cases: As lawsuits and legislatures go after the credit rating agencies that misled investors, rating agencies are hiding behind the First Amendment. It’s an argument we’ve seen time and time again from corporations, who claim free speech to shake off regulation and dupe consumers. I’ll be giving this issue its own full post soon, but here’s the legal issue in a sentence: Rating agencies are claiming the same First Amendment rights as news organizations, arguing that an “actual malice” needs to be applied to their thoroughly misleading bond ratings, which cost investors millions. This difficult to meet legal standard is not invoked for information that is privately disseminated, so expect that to be the key issue in a number of suits going forward.

Corporations will not rest until they can run rampant over the American people, and they have an army of corporate lawyers helping them. Unless you are an attorney with lots of pro-bono time on your hands, there is not much you can do to help win the cases, but we need all hands on deck to get this critical issue out there. The silver lining of Citizens United was alarm bells it set off as corporate thugs and their robed cronies were stealthily trying to rewrite the Constitution.

So, spread the word, tell the people, and fight back. Fight back in your local paper, in your state legislatures, and in the upcoming elections. And pace yourself, because the battle for clean elections is one for the long haul. Without clean elections, all other issues will die a quiet death.

……………..
In the interest of full disclosure, something that I support as policy, I am assisting two coalition groups, Free Speech for People and Move to Amend. Both groups are focused on passing a Constitutional Amendment to address the role of corporations in elections (and possibly the larger issue of corporate personhood- but that’s a topic for another time). They are both involved in waking people up to this corporate assault on democracy.

Thank you for your service to our district. You have long been our Congressman, and will likely serve in that capacity until you choose to retire. That is why we are writing you to express concern with the state of campaign finance reform in the United States, and your own role with respect to this issue.

While you have generally supported progressive legislation regarding campaign finance reform, including the Fair Elections Now Act, I wonder why you do not set a stronger example for your fellow Congressmen with your actual fundraising behavior. This election cycle (09-10) you have raised nearly a million dollars, including over $277,000 from PACs, which we believe have a deleterious effect on the democratic process. Everyone knows that you will win any primary or general election challenge easily, if one even exists. Do you really need to raise this much money, especially from PACs?

The recent D.C Circuit ruling in Speech Now, following on the heels of Citizens United, will allow for unlimited donations to PACs, increasing their undemocratic roll in the election process. Why would you embrace the PAC system, when other Democrats have been able to fundraise sufficiently without using them?

Your two biggest donors, according to OpenSecrets.org, are Newmark Knight Frank and the Loews Corporation. The former describes itself as a major global real estate investor; in fact, real estate is the largest source of your contributions. We have long understood the real estate lobby in New York to be opposed to the interests of renters, who make up the overwhelming majority of your constituents. If we are inaccurate in that assumption, please let us know. More troubling is the Loews Corporation, which touts itself, among other things, as a major oil and gas explorer. In fact, Loews is a majority shareholder in Diamond Offshore Drilling, which, as the name suggests, engages in off-shore drilling. We are not sure why your fundraisers feel that you need to bring in money from these dubious sources, and regardless of your voting record, it troubles us to think what kind of access these corporations believe they are buying.

Mr. Nadler, you will have our support for Congress in 2010, as you always have. But with the system in Washington as broken as it is, we need more representatives who will lead by example, particularly when their stature and electoral situation affords them the ability to do so.

This morning the Coffee Party announced that it will be focusing its attention on financial reform and campaign reform, and is polling members to determine the specific legislation it will focus its efforts on. For those who have been observing the Coffee Party with cautious optimism, this is great news, and a tremendous step forward for the nascent organization.

Financial reform and campaign finance reform are not sexy issues, but they are both critical issues America needs to confront now. They are also not easy topics to grapple with. I know this from having studied the issues closely on behalf of the Coffee Party research team. The Coffee Party deserves credit for engaging two complicated issues that matter rather than more superficial issues that lend themselves to easier messaging.

The Bull Moose Movement stands for the improving the civic education of Americans so that they can make the right choices at the ballot box and be engaged enough to pressure their elected officials between elections. The Coffee Party has demonstrated the potential to play a similar role, but we have all been waiting to see how their online sign-ups and coffee house meetings will translate into meaningful engagement and action.

By choosing these issues, the Coffee Party is demonstrating a willingness to tackle important, substantive issues. This is a relief, as I, and many others were unconvinced of their initial goal, which was to ‘foster a more civil dialogue.’ We wondered what the dialogue would actually be about, and the answer, reassuringly, is a discussion of two major policies.

The selection of campaign finance reform and financial reform also demonstrate the Coffee Party’s astute dedication to big-tent political issues. Both of these issues should be bi-partisan/non-partisan, and Republican opposition in Washington to both is astonishingly out of touch with independents and moderates. Never in recent memory has Republican hypocrisy been more flagrant than on the issue of financial reform. Even as Republicans slam the bailout initiated by George Bush that many of them voted for, and label Obama the Wall Street President, they shake down Wall Street for campaign handouts in return for their continued opposition to reform.

It still remains to be seen what exactly the Coffee Party will do to follow up discussions about these reforms. I suppose 100,000 people calling their Congressional representatives would send a strong message, but more effort than that went into stopping the Iraq War and fighting for the public option. Most elected officials are obstinate people who read their campaign treasurer’s reports before they ask how their constituents are doing.

My hope is that the Coffee Party will embrace the promotion of civic education that we are pushing for at the Bull Moose Movement. Really get into neighborhoods and talk to neighbors, small businesses and local media about why all of this matters. The Bull Moose Movement’s goals are extremely long-term, as civic education on the larger issue of corporate influence can’t happen overnight, or in one election cycle. That is why we do not really lobby for specific bills, which are often heavily watered down by the time the ‘debate’ starts (see: Senate financial reform bill). That said, the Coffee Party is strong in numbers, and could perhaps provide the last bit of momentum needed to push this weak sauce financial reform bill through. As for campaign finance reform, 100,000 phone calls won’t be enough to get the changes we need, but it’s not a bad start.

We’ve all had jobs where we have difficulty explaining what exactly we do, but elected officials, who are prominent public figures, should not be having that problem. We call them legislators, yet very few of them actually legislate. What they are really up to is the topic of today’s article.

This entire political era is so awash with corporate funding that no single election or piece of legislation can fix it. That is why we must begin the work of a generation, empowering people through civic education that in the long term will change the American public’s expectation of their political leaders, a process discussed in this ongoing series on improving democracy.

In Part I, The Bull Moose and the Sneaky Corporate Beast, we looked at the rationale for corporate influence and recognized that whether corporate influence comes in the blunt for of an Exxon commercial or a below the radar donation to the Chamber of Commerce, it is an adversarial force that is not going away.

In Part II, Sense of Entitlement, we observed another corrosive aspect of today’s political culture, the elected politician’s belief that he or she is a reverent figure, not a public servant, a worldview derived in part from a lavish corporate-funded lifestyle that allows elected politicians the opportunity to avoid their actual constituents as much as possible.

In Part III, Politicians Are Crack Fiends for Cash, we assessed the politician’s desperate needs for constant campaign cash, a need that inevitably plays into the hands of cash-rich corporations looking to make a sound investment.

In Part IV, the most recent piece, Movin’ On Up, we marveled at the brazenness of politicians who use their elected positions as electoral placeholders and spend all their time campaigning for the next office, rather than getting any work done in their current office.

Today, in Part V, we explore what our elected officials are really doing with their time, and how to demand accountability. Keeping in mind that Congress is not in session for large chunks of the year, and local legislatures are in session even less, what exactly are these folks getting done:

#1 Fundraising: The amount of time our elected officials spend fundraising is disgusting for a variety of reasons, especially considering the usual sources of funding. There are fundraising dinners and galas, and the various ‘receptions’ sponsored by interest groups. True, these events normally take place after the “work day”, but as we’ll see, the work day itself is pretty thin. But most elected officials spend hours every day “dialing for dollars,” work that potential donors or past donors list for contributions.

#2 Constituent Services: Indeed, this is the one thing most smart offices actually do, though as we saw in the case of New York State Senator Pedro Espada, not even all officials bother with it. Constituents call with various government benefit or government service issues, and the unpaid intern or low-paid staffer helps them out. Hardly ever does the elected official himself get involved in such relatively trivial issues, however. Thus, I am hard-pressed to give an elected official “credit” for constituent services.

#3 Voting: Over the last four months, America watched the drama of passing a healthcare bill play out. Granted, there were some Congressional leaders who worked their asses of getting the bill together, and even unhelpful participants like Congressman Stupak and Senator Gregg at least engaged in the process. But of our 535 members of Congress, I’m guesstimating that at least 400 had absolutely no role crafting the final bill or any amendment to it. They were presented with the same information as the American public, and just had to decide “yes” or “no.” Voting is not hard, folks. We’ve all done it, lots of times. Here is the legislators guide to voting:

Majority party members:

Step 1: Await party leaders’ instructions on when to vote “yes” and when to vote “no”, especially on complicated procedural motions. Ornery, centrist Democrats, skip to Step 2.

Step 2: Make sure not to anger the donors: These reelections don’t pay for themselves. Is there a way you can complain about this being a government intrusion?

Minority party members (Republican):

Vote no. Try to completely block a vote from happening, if possible.

Minority party members (Democrat):

Complain and “lead charge” to stop the bill. Ultimately vote for bill anyway if lobbying pressure is strong.

That’s pretty much it. Legislative leadership will ensure that wildly unpopular bills will never make it to a vote, or at least will be properly framed to confuse the electorate in advance. It’s quite rare that a legislator has to make “the tough choice” between his party and his constituents back home. Sure, Michigan legislators always support the auto industry, Texans support oil, West Virginians support coal mining, Arkansans support Walmart and New Yorkers support Wall Street, but those special interest groups are tough enough to block meaningful reforms in any of those areas before a bill comes up for a vote anyway.

So the next time your legislator votes the right way, cross yourself and be thankful they didn’t vote the wrong way, but don’t get head over heels about it. This part of the job is simply not hard work for most legislators, and any of you could do it.

#4 Hearings: A few years ago I was thrilled to see one of my closest friends testifying on climate change before Congressman Markey, chairman of an important committee. The camera wisely focused on my friend’s face, because as soon as it zoomed out, viewers realized that Congressman Markey was the only Congressman in attendance- the others hadn’t even bothered to send staffers.

The problem is no less acute in local politics- when I was working at the New York City Council, I became quite acquainted with the City Council hearing process, which usually involved one or two members doing the questioning, and others showing up hours late, or just making brief appearances, in order to ‘clock in’ for the day.

Finally, many important hearings are rigged against reform. Unbelievably, in the weeks of healthcare hearings presided over by Senator Max Baucus, not a single representative of single-payer reform was even allowed to speak. Several medical professions advocating for single-payer did try to demonstrate the hearings, and were promptly arrested.

#5 Meetings: “The Congressman is in a meeting.” Put simply, legislators should publicly post their schedules. I remember attending one set of meetings. I was with AIPAC as one of their student delegates (LONG story), and we were given access to a Senator and a Congressman, as well as other staffs. We’d go in, exchange pleasantries, joke around. The AIPAC rep would explain to the official or staffer what vote he was looking for on a certain bill. The official or staffer agreed, and we were on our way, maybe after a snack.

#6 Pandering/Media Outreach: Rare if the gifted legislator like Eddie Murphy’s “Distinguished Gentleman”, who sees a constituent suffering and introduces legislation to help. Most press releases are reactionary, behind the ball, finger-wagging at the culprit de jour, sometimes with the half-hearted promise to do something about the situation. Media outreach is critical to a politician’s survival, so I’m not condemning the practice, merely the emptiness that usually accompanies it.

#7 Debate: Just kidding. While we can certainly give props to the C-Span regulars on both sides of the aisle, it’s depressing to watch the camera pan to a completely empty gallery.

#8 Legislating: Finally, we get to legislatin’. So who writes these long, complicated laws?

In the New York City Council, the legal counsel to the City Council will receive a one or two paragraph description of the law the councilman wants to pass, and then do most of the work. Congressmen have legal staffers to do legislative work, and Committee play an important role. Sometimes special interests groups and lobbyists hand legislators pre-written bills that are only partially modified before becoming law. Only a rare politician like Representative Alan Grayson takes personal ownership of his own bills, and he hasn’t exactly passed many of them.

#9 Running An Office: Should a legislator receive credit for running an office? And don’t most executives get credit for the work of their subordinate staff? The difference is that in the private sector or in the non-profit world, at least in theory, executives’ success or failure directly impacts their access to resources, including staff. However, every elected legislator receives a staff, an office and numerous perks, no matter how much he won his election by, or how little he accomplished last term. It is not impressive to “run” an office that comes with a fixed budget and staff size year after year, especially when the Chief of Staff deals with its personnel issues.

Conclusion: This article has already gone on longer than I intended it to. So much to say about how little our elected officials do. I realize, upon reading it over, that it comes off as extremely cynical. But when we started the Bull Moose Movement, it was our goal to take a big step back and look at odious trends in our democratic politics, rather than get hung up on individual leaders or bills.

In the next piece, I’ll discuss possible ways to make sure politicians are doing their jobs. My hope is that demanding more from our elected officials can become a universal rallying cry, as it’s the least partisan reform imaginable. For now, however, take a hard look at your own legislator, even putting politics aside. Does your representative hold hearings, invite the key players, and ask the hard questions? Does your representative take the findings and respond with action, including drafting legislation? Most importantly, is your representative spending more time listening to the issues your community is facing or fundraising for the next election? The answer is a phone call away.

Tuesday’s post on politicians’ all consuming sense of entitlement was but an introduction to a series on the psyche of the elected official, and why they must not be depended on for reform and progressive change. The elected official has two primary preoccupations- getting reelected and getting ready to run for higher office. These two agendas intertwine in the crack fiend-like dependence on raising cash constantly.

It used to befuddle me why safe incumbents were so hell-bent on milking their mailing lists for money and holding fundraisers within weeks of re-election. One reason is to scare off challengers, be they general election challengers in contested districts or primary challengers in very liberal or very conservative districts. Though primary challenges usually occur due to a scandal or ideological deviation from the incumbent, Reshma Saujani’s well financed challenge to Representative Carolyn Maloney in New York shows lightning can strike at any time. One congressional staffer to a very safe liberal explained to me that his Congressman needs to fundraise every year not just to scare off challengers, but to build relationships with those donors for when he needs them. One shudders to think what “building a relationship” entails when one side is handing cash to the other.

Raising money not only preserves one’s seat, it also prepares an officeholder for taking the next step. Most seats open quite suddenly. A death, scandal, or political appointment may create a vacancy in an office at any moment. A candidate has to be ready with the $3 million unspent from his last race when the moment calls. Even if the race is not a special election, even ‘regular’ circumstances that would encourage a run for higher office, such as the retirement of an incumbent or changing political winds, requires one to be ready with at least a rolodex of people who can raise money in a hurry.

It is obvious that there are only so many numbers to call and receptions to attend if you’re looking a few million dollars in handouts- wealthy individuals and corporate interests. The quid pro quo ranges from implied to explicit, but the result is the same. The question is, what citizens do about it?

Sure, strong campaign finance laws would be helpful, but so are a lot of other things that won’t happen any time soon. We need to think creatively about how to apply pressure and build awareness. The first wave of elected officials to be targeted with outside pressure should be safe incumbents. They need to be weaned off of their relationships with donors when they don’t “need” the money. At town halls, elected officials should pledge not to hold fundraising events during their first year in office. If you really want to make them look absurd, make them pledge not to hold fundraising events or make fundraising phone calls during their first three months in office! So much time goes into these phone calls and events that it impedes their ability to legislate and govern, which is what we the tax-payers sent them to do.